Department of Consumer Affairs seeks $10 million general‑fund backfill to cover litigation at bureau

Taylor Schick, chief fiscal officer at the Department of Consumer Affairs, told the Senate Budget Subcommittee No. 1 on Education that the Bureau for Private Postsecondary Education is requesting a one‑time $10,000,000 general‑fund backfill to repay a $10,000,000 loan taken this year to cover litigation costs. "The bureau is requesting one‑time backfill of $10,000,000 from the general fund to repay a $10,000,000 loan taken this year to support recent litigation against the bureau," Schick said, adding that provisional language would allow repayment without interest and permit budget adjustments in fiscal year 2026–27 to address a remaining attorney‑fee payment.

Schick told members two award judgments already made this fiscal year roughly totaled $10,000,000 and that a final attorney‑fee payment on appeal is expected to be substantially smaller. He said the backfill would preserve the bureau's special‑fund balance while the Legislative sunset review considers fee‑level adjustments that could restore solvency over time.

Lisa King of the Legislative Analyst's Office recommended against shifting those regulatory costs to the general fund. "We recommend against shifting some of those costs to the general fund as regulatory agencies are intended to be self‑sustaining using fee revenue to cover their costs," King said, noting the bureau already received a special‑fund loan that addresses costs through the budget year. King also warned that exempting the bureau from paying interest on its loan would be an unusual step and suggested counsel review whether an interest‑free repayment is permitted under Proposition 26.

Senator Archuleta pressed whether the $10,000,000 request would cover all judgments; Schick responded that the two judgments already paid totaled roughly $10,000,000 and that the remaining attorney‑fee exposure would likely be much smaller. Schick said the administration estimates interest on a July repayment would be about $245,000 and does not expect the bureau to incur that cost if the waiver language is adopted.

No formal action was taken during the hearing. Committee members asked for follow‑up materials clarifying the remaining legal exposure, the proposed provisional language, and how fee adjustments would change the bureau's long‑term solvency picture.